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Collection, 722.

Compromise, 723.

Priority, 724.

CHAPTER 11

CLAIMS BY THE UNITED STATES

722. Collection.

Liability for failure to give priority, 725.
Survival of action to recover damages, 725a.

The auditors, under the direction of the Comptroller of the Treasury, shall superintend the recovery of all debts finally certified by them, respectively, to be due to the United States. July 31, 1894 (28 Stat. 206); 31 U. S. C. 93.

Sec. 4, act of

The duties of the auditors and Comptroller of the Treasury are now performed by the General Accounting Office. See 1646, post.

Notes of Decisions

Liability of owner.-Liability does not attach against owner for negligent operation of automobile by another unless legal status of master and servant or principal and agent exists; mere relationship of father and son being insufficient to impose liability. Spegele *. Blumfield (Pa., 1935), 182 A. 149.

Automobile owner cannot be held liable for negligent act of another operating automobile merely with owner's consent, in absence of proof that driver operated automobile as owner's agent or servant. Tourkakis v. Billman (Mo., 1934), 71 S. W. (2d) 1084.

bodily harm to himself and others, is liable for bodily harm caused thereby, applies not only to owner of automobile but also to one who has right to permit and power to prohibit its use. Rounds v. Phillips (Md., 1935), 177 A. 174.

Contributory negligence.-In suit by United States for damages alleged to have occurred to automobile owned by it, defendants held entitled to set up defense that negligence of employee of United States at time of accident was proximate cause of damage. U. S. v. Moscow Seed Co. (D. C., 1936), 14 F. Supp. 135.

Liability of father for acts of minor son. Father, furnishing minor son with automobile, was liable for his negligence, though automobile was first registered in son's name and later in mother's name after son's license was revoked, if father permitted son to drive though knowing of son's recklessness and incompetency in operating automobiles. Rounds . Phillips (Md., 1934), 170 A. 532. Rule that one who supplies automobile for Use of another whom supplier knows or should know to be likely, because of his youth, inexperience, or otherwise, to use it in manner involving unreasonable risk of 723. Compromise.-Upon a report by a district attorney, or any special attorney or agent having charge of any claim in favor of the United States, showing in detail the condition of such claim, and the terms upon which the same may be compromised, and recommending that it be compromised upon the terms so offered, and upon the recommendation of the Solicitor of the Treasury, the Secretary of the Treasury is authorized to compromise such claim accordingly. But the provisions of this section shall not apply to any claim arising under the postal laws. R. S. 3469; 31 U. S. C. 194.

Contributory negligence is not complete defense to action against railway company for death of one struck by train, but only requires reduction of damages in proportion that it contributed to deceased's injury. Thomas v. Southern Ry. Co. (C. C. A., 1937), 92 F. (2d) 445.

Laches.-Defense of laches is not available in suit by state or federal government to enforce public right or protect public interest. State v. Vincent (Oreg., 1935), 52 P. (2d) 203.

As to any case referred to the Department of Justice for prosecution, the function of decision whether and in what manner to prosecute, or to compromise, or to appeal, or to abandon prosecution, formerly exercised by any agency or officer, is transferred to the Department of Justice by Executive Order No. 6166 of June 10, 1933, issued under authority of Title IV, Part II, act of June 30, 1932 (47 Stat. 413), as amended.

The office of Solicitor of the Treasury was abolished, and its powers, duties, and functions transferred to the General Counsel for the Treasury Department, by section 512, Revenue Act of May 10, 1934 (48 Stat. 758), which created the latter office.

Rules and regulations for carrying into effect the provisions of this section are published in Treasury Department Circular No. 39, May 20, 1936 (Federal Register, May 29, 1936, p. 575).

Notes of Decisions

In general. By reason of the broad and general terms of this section and in the light of the principle that the sovereign must possess incidental powers necessary to carry general statutes giving general powers into effect, the United States may accept an offer of a railroad company to compromise a claim of the United States against said company in the sum of $204,862.74 for fire trespass, by the payment of $10,000 in cash and the relinquishment of the right of the company to receive from the United States certain lands selected by it in accordance with the terms of a congressional grant. (1933) 37 Op. Atty. Gen. 298.

Authority of Attorney General.-Where liability has been established by a valid judgment, or is certain-i. e., liquidated or

undisputed-and there is no doubt as to the ability of the Government to collect, there is no room for mutual concessions and therefore no basis for compromise under R. S. 3469; but where there is a bona fide dispute as to either a question of fact or of law, and accordingly room for mutual concession, compromise settlement is not precluded, the adequacy of the offer to be determined by the exercise of sound discretion. This should not, however, be understood to curtail the inherent and statutory power of the Attorney General to absolutely dismiss or discontinue suits in which the Government is interested, and, a fortiori, to terminate the same upon terms at any stage by way of compromise or settlement. (1933) 38 Op. Atty. Gen. 94; (1934) 38 Op. Atty. Gen. 98.

724. Priority. Whenever any person indebted to the United States is insolvent, or whenever the estate of any deceased debtor, in the hands of the executors or administrators, is insufficient to pay all the debts due from the deceased, the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed. R. S. 3466; 31 U. S. C. 191.

Notes of Decisions

In general.-Statutory mandate that upon voluntary assignment of insolvent debtor debt due to United States shall first be satisfied is absolute so long as property has not been divested out of debtor before right of preference of United States accrues (31 U. S. C. A. sec. 191). In re Lincoln Chair & Novelty Co. (N. Y., 1937), 9 N. E. (2d) 7.

Claims against insolvent contractor.Claims against insolvent surety on in

solvent contractor's bond to United States for amount due for labor and materials furnished contractor held not entitled to priority as for debt due United States, though statute authorizes suit against contractor's receiver and surety in name of United States for claimant's benefit (U. S. C. A. 31:191; U. S. C. A. 40:270). Em mons v. Union Indemnity Co. (N. J., 1934), 175 A. 141.

725. Liability for failure to give priority to the United States. Every executor, administrator, or assignee, or other person, who pays any debt due by the person or estate from whom or for which he acts, before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate for the debts so due to the United States, or for so much thereof as may remain due and unpaid. R. S. 3467; 31 U. S. C. 192.

725a. Survival of action to recover damages.-That no civil action to recover damages, brought by the United States or in its behalf, or in which the United States shall be directly or indirectly interested, and pending against any defendant prior to the time of his death, in any court of the United States, shall abate by reason of the death of any such defendant; but any such action shall survive and be enforceable against the estate of any such deceased defendant. This Act shall not be construed to deprive the plaintiff in any such action of any remedy which he may have against a surviving defendant. Act of June 16, 1933 (48 Stat. 311); 28 U. S. C. 780a.

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726. Authority and appropriations. No executive department or other Government establishment of the United States shall expend, in any one fiscal year, any sum in excess of appropriations made by Congress for that fiscal year, or involve the Government in any contract or other obligation for the future payment of money in excess of such appropriations unless such contract or obligation is authorized by law. R. S. 3679; sec. 3, act Feb. 27, 1906

(34 Stat. 48); 31 U. S. C. 665.

No contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the War and Navy Departments, for clothing, subsistence, forage, fuel, quarters, or transportation, which, however, shall not exceed the necessities of the current year. R. S. 3732; 41 U. S. C. 11.

Provided, That no contract or purchase on behalf of the United States shall be made, unless the same is authorized by law or is under an appropriation adequate to its fulfillment, except in the War and Navy Departments, for clothing, subsistence, forage, fuel, quarters, transportation, or medical and hospital supplies, which, however, shall not exceed the necessities of the current year. Act of June 12, 1906 (34 Stat. 255); 41 U. S. C. 11.

No contract shall be entered into for the erection, repair, or furnishing of any public building, or for any public improvement which shall bind the Government to pay a larger sum of money than the amount in the Treasury appropriated for the specific purpose. R. S. 3733; 41 U. S. C. 12.

The heads of the executive departments were required to apportion the appropriations for the contingent funds among the bureaus and offices of the departments by act of Aug. 23. 1912, sec. 6, post, 1743.

Restrictions on contracts for the rent of any building in the city of Washington, until an appropriation therefor had been made, were made by a provision of act Mar. 3, 1877, post, 961.

Apportionment of appropriations for contingent expenses in monthly or other allotments, 1731, post.

Appropriations for printing not to be exceeded, limitation on number of reports, etc.. post, 1751a. 1780, 1782.

Notes of Decisions

Southern Surety Co. v. U. S.

(1932), 75 Ct. Cl. 47.

Requisites and validity; authority to ex-binding. ecute. It is axiomatic that Government officials must act within the scope of their authority, and that all persons dealing with them must be held to know the extent of their authority. Alliance Construction Co. v. U. S. (1934), 79 Ct. Cl. 730.

The failure of the Government to comply with statutory requirements relative to public contracts enacted solely for the protection of the Government does not render such contracts void, but only voidable at the Government's option; and only the Government can take advantage of such failure. (1935) 38 Op. Atty. Gen. 328.

Consideration.-Public officers are without authority to make a contract for which the Government receives no benefit or consideration. Vulcanite Cement Co. v. U. S. (1932), 74 Ct. Cl. 693.

Contingent fees.-Contingent fee contracts are valid where not in contravention of public policy and are condemned only where attorney has taken advantage of client's circumstances to exact an unreasonable and unconscionable proportion of client's claim (Mason's Minn. St. 1927, sec. 9470). Hollister v. Ulvi (Minn., 1937), 271 N. W. 493. Forms and provisions.-The proposed contract between the Department of Commerce and the Remington-Rand Company, for the rental of 42 tabulating machines at $1,850 per month, the contract stipulating that said rental is based upon the understanding that all cards used with the equipment shall be purchased from the lessor and that if such cards are not purchased from the lessor the machine rentals shall be $2,170 per month, is illegal in respect of the restriction upon the purchase and use of cards, which is in violation of Sec. 3 of the Clayton Act (38 Stat. 731). The execution of the proposed contract will not impose upon the Department of Commerce any legal obligation to refrain from purchasing cards from other sources, or to pay the increased rental for doing so. (1932), 36 Op. Atty. Gen. 524.

There is no prohibition, express or implied, preventing the head of a department or independent establishment from inserting in contracts for the purchase of supplies such provisions, in addition to those specifically required by statute, as he may deem to be desirable in the interest of the Government or of the public welfare. Such authority must necessarily be included within the discretion vested in him. (1933), 37 Op. Atty. Gen. 199.

A provision in a Government contract that the contractor "will make no claim against the United States by reason of estimates, tests, or representations of any officer or agent of the United States," is valid and

Congress may by statute require Government contracts to contain provisions governing the wages to be paid by the contractors, and for the determination of facts relating thereto by a specified Government official: and whether or not such provisions be actually contained in the contract as written and executed, they become a part of it by virtue of the statute itself. Alliance Construction Co. v. U. S. (1934), 79 Ct. Cl. 730.

Rights and liabilities of Government.When the United States, with constitutional authority, makes contracts, it has rights and incurs liabilities similar to those of individuals who are parties to such instruments. Banister v. Lollis (S. C., 1937), 190 S. E. 511.

Bids. Where the United Shipbuilding and Dry Dock Corporation, a subsidiary of United Dry Docks, Incorporated, received an award through competitive bidding to construct two torpedo boat destroyers for a specific amount, and accompanying its bid was a copy of a contract between it and the United Dry Docks, Incorporated, showing the relationship between the two companies, and an undertaking on the part of the latter company to furnish the shipyards, equipment and labor in case of award, it was Held, That although the bid was formally submitted by the former company only, such bid might be properly considered the joint bid of the two companies, and the award amended to make both companies jointly and severally parties to the formal contract. (1934) 38 Op. Atty. Gen. 91.

Construction of terms; in general.—(1) It is the duty of the court to give effect, if possible, to every word or phrase of a contract and to avoid a construction that would imply that the parties used meaningless or superfluous words, or that they were ignorant of the meaning of the language employed by them. (2) Courts can not amend or alter the terms of contracts under the guise of construing them. Bethlehem Steel Co. v. U. S. (1932), 75 Ct. Cl. 845.

By parties.-Practical construction of contract by parties to contract is entitled to great weight, where their interpretation is a fair one. U. S. v. I. B. Miller, Inc. (C. C. A., 1936), 81 F. (2d) 8.

Preliminary negotiations.-Where the meaning of a contract is clearly expressed in the formal written instrument, the negotiations leading up to its execution are irrelevant. The written contract merged all previous negotiations, and is presumed, in law, to express the final understanding of the parties. Tiedemann Corp. v. U. S. (1933), 78 Ct. Cl. 16.

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